-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N3m5862brixCYhgQt0ddwQCvkixs80uBCY4f0gwd9H1PtAO8ReiuKvGTNDQXBDIq IGZE7KjmsvBqq2k/HemQSQ== 0000108703-96-000005.txt : 19961011 0000108703-96-000005.hdr.sgml : 19961011 ACCESSION NUMBER: 0000108703-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961010 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYMAN GORDON CO CENTRAL INDEX KEY: 0000108703 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 041992780 STATE OF INCORPORATION: MA FISCAL YEAR END: 0528 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03085 FILM NUMBER: 96641900 BUSINESS ADDRESS: STREET 1: 244 WORCHESTER ST STREET 2: BOX 8001 CITY: NORTH GRAFTON STATE: MA ZIP: 01536 BUSINESS PHONE: 5088394441 10-Q 1 WYMAN-GORDON FORM 10-Q 1ST QUARTER FISCAL 1997 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) { X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 1996 OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to COMMISSION FILE NUMBER 0-3085 WYMAN-GORDON COMPANY (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-1992780 (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 244 WORCESTER STREET, BOX 8001, NO. GRAFTON, MASSACHUSETTS 01536-8001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 508-839-4441 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
OUTSTANDING AT CLASS AUGUST 31, 1996 Common Stock, $1 Par Value 35,714,766
Page 1 of 16 2 Part I. Item 1. FINANCIAL STATEMENTS WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, AUGUST 31, 1996 1995 (000's omitted, except per share data) Revenue $134,235 $114,077 Less: Cost of goods sold 122,744 95,897 Selling, general and administrative expenses 10,052 9,197 Other charges 15,779 900 148,575 105,994 Income (loss) from operations (14,340) 8,083 Other deductions (income): Interest expense 2,722 2,886 Miscellaneous, net (5,197) 96 (2,475) 2,982 Income (loss) before income taxes (11,865) 5,101 Provision (credit) for income taxes (19,680) - Net income $ 7,815 $ 5,101 Net income per share $ .21 $ .14 Shares used to compute net income per share 36,619 35,889
The accompanying notes to the consolidated condensed financial statements are an integral part of these financial statements. -2- 3 WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
AUGUST 31, MAY 31, 1996 1996 (000's omitted) ASSETS Cash and cash equivalents $ 27,904 $ 30,134 Tax and interest receivable 20,258 - Accounts receivable 89,469 94,928 Inventories 72,820 65,873 Prepaid expenses 11,154 14,338 Total current assets 221,605 205,273 Property, plant and equipment, net 141,928 140,408 Intangible assets 19,723 19,899 Other assets 7,306 10,310 $390,562 $375,890 LIABILITIES Borrowings due within one year $ 77 $ 77 Accounts payable 43,442 40,484 Accrued liabilities and other 52,563 48,178 Total current liabilities 96,082 88,739 Restructuring, integration, disposal and environmental 17,569 18,275 Long-term debt 90,231 90,231 Pension liability 5,478 1,698 Deferred income tax and other 14,106 17,717 Postretirement benefits 47,727 49,287 STOCKHOLDERS' EQUITY Preferred stock - none issued - - Common stock issued - 37,052,720 shares 37,053 37,053 Capital in excess of par value 32,172 33,291 Retained earnings 73,689 65,653 Less treasury stock at cost August 31, 1996 - 1,337,954 shares May 31, 1996 - 1,480,448 shares (23,545) (26,054) 119,369 109,943 $390,562 $375,890
The accompanying notes to the consolidated condensed financial statements are an integral part of these financial statements. -3- 4 WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, AUGUST 31, 1996 1995 (000's omitted) Operating activities: Net income (loss) $ 7,815 $ 5,101 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,956 4,227 Other charges 13,045 - Provision for equity investment 2,734 900 Changes in assets and liabilities net of purchase price activity: Accounts receivable 5,261 2,494 Tax and interest receivable (20,258) - Inventories (7,723) (1,505) Prepaid expenses and other assets 709 (354) Accrued restructuring, disposal and environmental (782) (2,019) Income and other taxes (4,343) 2,760 Accounts payable and accrued liabilities 2,241 (4,974) Net cash provided by operating activities 3,655 6,630 Investing activities: Capital expenditures (7,184) (1,840) Proceeds from sale of fixed assets 323 1,393 Other, net (413) (89) Net cash used by investing activities (7,274) (536) Financing activities: Issuance (payment) of debt - 897 Net proceeds from issuance of common stock 1,389 589 Net cash provided (used) by financing activities 1,389 1,486 Increase (Decrease) in cash (2,230) 7,580 Cash, beginning of year 30,134 13,856 Cash, end of period $27,904 $21,436
The accompanying notes to the consolidated condensed financial statements are an integral part of these financial statements. -4- 5 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS August 31, 1996 NOTE A - BASIS OF PRESENTATION In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly its financial position at August 31, 1996 and its results of operations and cash flows for each of the three months ended August 31, 1996 and 1995. All such adjustments are of a normal recurring nature. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with Article 10 of Securities and Exchange Commission Regulation S-X and, therefore, do not include all information and footnotes necessary for a fair presentation of the financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In conjunction with its May 31, 1996 Annual Report on Form 10-K, the Company filed audited consolidated financial statements which included all information and footnotes necessary for a fair presentation of its financial position at May 31, 1996 and 1995 and its results of operations and cash flows for the years ended May 31, 1996 and 1995, the five months ended May 31, 1994 and the year ended December 31, 1993 in conformity with generally accepted accounting principles. Where appropriate, prior period amounts have been reclassified to permit comparison. NOTE B - ADOPTION OF RECENT ACCOUNTING STANDARDS Effective June 1, 1996, the Company adopted Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 prescribes the accounting for the impairment of long-lived assets that are to be held and used in the business and similar assets to be disposed of. The adoption has not had a material effect on earnings or the financial position of the Company. NOTE C - INVENTORIES Inventories consisted of:
AUGUST 31, 1996 MAY 31, 1996 (000's omitted) Raw material $34,914 $21,608 Work-in-process 44,554 51,125 Supplies 2,710 3,168 82,178 75,901 Less progress payments 9,358 10,028 $72,820 $65,873
-5- 6 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) August 31, 1996 NOTE C - INVENTORIES (Continued) If all inventories valued at LIFO cost had been valued at first-in, first-out (FIFO) cost or market which approximates current replacement cost, inventories would have been $16,662,000 higher than reported at August 31, 1996 and May 31, 1996. There were no LIFO inventory credits to cost of goods sold in the three months ended August 31, 1996 or August 31, 1995. NOTE D - COMMITMENTS AND CONTINGENCIES At August 31, 1996, certain lawsuits arising in the normal course of business were pending. The Company denies all material allegations of these complaints. In the opinion of management, the outcome of legal matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. The Company is subject to extensive, stringent and changing federal, state and local environmental laws and regulations, including those regulating the use, handling, storage, discharge and disposal of hazardous substances and the remediation of alleged environmental contamination. Accordingly, the Company is involved from time to time in administrative and judicial inquiries and proceedings regarding environmental matters. Nevertheless, the Company believes that compliance with these laws and regulations will not have a material adverse effect on the Company's operations as a whole. The Company had foreign exchange contracts totaling approximately $19,900,000 at August 31, 1996. These contracts hedge certain normal operating purchase and sales transactions. The exchange contracts generally mature within six months and require the Company to exchange U.K. pounds for non-U.K. currencies or non-U.K. currencies for U.K. pounds. Transaction gains and losses included in the Consolidated Condensed Statements of Operations for the three months ended August 31, 1996 and 1995 were not material. NOTE E - INCOME TAX REFUND In the three months ended August 31, 1996, the Company recognized the net benefit of a refund of prior years' income taxes amounting to $19,680,000, plus interest of $3,484,000. The refund relates to the carryback of tax net operating losses to tax years 1981, 1984 and 1986 under the provisions of Internal Revenue Code Section 172(f). The amount of net operating losses carried back to such years was approximately $48,500,000. At August 31, 1996, the Company has approximately $38,000,000 of net operating loss carryforwards available to offset future taxable income. -6- 7 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) August 31, 1996 NOTE F - LONG-TERM, FIXED PRICE CONTRACTS In the three months ended August 31, 1996, the Company's evaluation of its accruals for losses on long-term, fixed price contracts took into consideration its new market-focused business operations management and continuing efforts toward focusing its factories, current raw material prices and changes in its cost structure. Based on this evaluation, the Company projected that the fully allocated cost to produce certain aerospace structural products at the Company's Grafton, Massachusetts facility exceeds the sales price provided in the long-term, fixed price contracts for such products. Cost of goods sold in the three months ended August 31, 1996 includes a net charge of $5,800,000 to recognize losses on such products included in the Company's backlog. NOTE G - OTHER CHARGES In the three months ended August 31, 1996, the Company recorded other charges of $15,779,000. Such other charges include $8,000,000 to provide for the costs of workforce reductions at the Company's Grafton, Massachusetts facility and the write-off and disposal of certain equipment. Other charges also include $2,300,000 to reduce the carrying value of certain assets of the Company's titanium castings operations, $2,485,000 to recognize the Company's 25.0% share of the net losses of its Australian Joint Venture and to reduce the carrying value of such joint venture, $250,000 relating to expenditures for an investment in another joint venture and $2,745,000 to reduce the carrying value of the cash surrender value of certain company- owned life insurance policies. In the three months ended August 31, 1995, the Company provided $900,000 in order to recognize its 25.0% share of the net losses of its Australian Joint Venture and to reserve for amounts loaned to such joint venture during the first quarter of fiscal year 1996 and to provide for expenditures for an investment in an additional joint venture. -7- 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY" Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations contain "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risk and uncertainty, including discussions of continuing raw material prices and availability and their impact on gross margins and business trends as well as liquidity and sales volume. Actual future results and trends may differ materially depending on a variety of factors, including the Company's successful negotiation of long-term customer pricing contracts and raw material prices and availability. For a discussion identifying important factors that could cause actual results to differ materially from those anticipated in forward-looking statements, see the Company's SEC filings, in particular see the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996 Part I, Item 1 - "Markets and Products - Aerospace", "Customers", "Marketing and Sales", "Raw Materials", "Employees", "Competition", "Environmental Regulations" and "Product Liability Exposure". The principal markets served by the Company are aerospace and power generation. Revenue by market for the respective periods was as follows (000's omitted):
THREE MONTHS ENDED AUGUST 31, 1996 AUGUST 31, 1995 % OF % OF AMOUNT TOTAL AMOUNT TOTAL Aerospace $ 93,062 69% $ 82,211 72% Power generation 30,636 23% 22,823 20% Other 10,537 8% 9,043 8% $134,235 100% $114,077 100%
-8- 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS THREE MONTHS ENDED AUGUST 31, 1996 ("first quarter of fiscal year 1997") COMPARED TO THREE MONTHS ENDED AUGUST 31, 1995 ("first quarter of fiscal year 1996") The Company's revenue increased 17.7% to $134.2 million in the first quarter fiscal year 1997 from $114.1 million in the first quarter fiscal year 1996 due to higher sales volume at the Company's Forgings and Castings Divisions. These sales volume increases during the first quarter of fiscal year 1997 as compared to the first quarter of fiscal year 1996 are reflected by market as follows: a $10.9 million (13.2%) increase in aerospace, a $7.8 million (34.2%) increase in power generation and a $1.5 million (16.5%) increase in other. The causes of the strength in these markets was higher engine build rates and higher demands for spares by aerospace engine prime contractors and higher extruded pipe shipments to energy customers. Revenues in the first quarter of fiscal year 1996 and, to a lesser extent, in the first quarter of fiscal year 1997, were limited by raw material shortages and production delays caused by capacity constraints of the Company's suppliers. The revenue increases mentioned above have occurred while the Company's backlog has grown to $690.6 million at August 31, 1996 from $477.1 million at August 31, 1995. The Company believes that the higher order activity reflects continued higher spares demand and new business resulting from increasing production rates on commercial aircraft by commercial airframe primes. The Company's gross margins were 8.6% in the first quarter of fiscal year 1997 as compared to 15.9% in the first quarter of fiscal year 1996. In the first quarter of fiscal year 1997, the Company's evaluation of its accruals for losses on long-term, fixed price contracts took into consideration its new market- focused business operations management and continuing efforts toward focusing its factories, current raw material prices and changes in its cost structure. Based on this evaluation, the Company projected that the fully allocated cost to produce certain aerospace structural products at the Company's Grafton, Massachusetts facility exceeds the sales price provided in the long-term, fixed price contracts for such products. Cost of goods sold in the three months ended August 31, 1996 includes a net charge of $5.8 million to recognize losses on such products included in the Company's backlog. Excluding the $5.8 million charge discussed above, gross margin was 12.9% in the first quarter of fiscal year 1997. Higher production volumes and productivity gains resulting from the Company's continuing efforts toward focusing forging production of rotating parts for jet engines in its Houston, Texas facility and forging production of airframe structures and large turbine parts in its Grafton, Massachusetts facility and continuing realization of cost reductions from synergies associated with the integration of Cameron Forged Products Company ("Cameron") favorably impacted gross margins in the first quarter of fiscal year 1997. These improvements have been more than offset by higher raw material costs. Beginning in the second half of fiscal year 1996, the -9- 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS THREE MONTHS ENDED AUGUST 31, 1996 ("first quarter of fiscal year 1997") COMPARED TO THREE MONTHS ENDED AUGUST 31, 1995 ("first quarter of fiscal year 1996") (Continued) higher spares demand referred to above has required the Company to purchase certain raw materials under terms not covered by long-term agreements ("LTAs") with its vendors. The Company simultaneously entered into supply (customer) and purchase (vendor) LTAs and minimized its raw material price exposure to an anticipated volume level. To the extent that the demand is greater than anticipated by the LTAs, the Company must purchase raw materials at market prices. The current rebound in demand for many of these raw materials, especially nickel and titanium, has resulted in significant market price increases which have negatively affected the Company's gross margins. The Company is not likely to see significant pricing relief for its products until early calendar 1997 when new LTAs that the Company expects to negotiate with its customers will go into effect. Until the new LTAs are finalized, the Company may continue to experience pressures on its gross margins. Gross margins in the first quarter of fiscal year 1997 were also negatively impacted by price and demand declines within the titanium golf club head business during competitor capacity additions and increasing costs of non-integrated finishing services. There were no LIFO credits recorded during the first quarter of fiscal year 1997 or 1996. Selling, general and administrative expenses increased 9.3% to $10.1 million during the first quarter of fiscal year 1997 from $9.2 million during the first quarter of fiscal year 1996. Selling, general and administrative expenses as a percentage of revenues improved to 7.5% in the first quarter of fiscal year 1997 from 8.1% in the first quarter of fiscal year 1996. The improvement as a percent of revenues is the result of higher revenues. During the first quarter of fiscal year 1997, the Company recorded other charges of $15.8 million. Such other charges include $8.0 million to provide for the costs of workforce reductions at the Company's Grafton, Massachusetts facility and the write-off and disposal of certain equipment. Other charges also include $2.3 million to reduce the carrying value of certain assets of the Company's titanium castings operations, $2.5 million to recognize the Company's 25.0% share of the net losses of its Australian Joint Venture and to reduce the carrying value of such joint venture, $0.3 million relating to expenditures for an investment in another joint venture and $2.7 million to reduce the carrying value of the cash surrender value of certain company-owned life insurance policies. -10- 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS THREE MONTHS ENDED AUGUST 31, 1996 ("first quarter of fiscal year 1997") COMPARED TO THREE MONTHS ENDED AUGUST 31, 1995 ("first quarter of fiscal year 1996") (Continued) During the first quarter of fiscal year 1996, the Company provided $0.9 million in order to recognize its 25.0% share of the net losses of its Australian Joint Venture and to reserve for amounts loaned to the Australian Joint Venture during the first quarter of fiscal year 1996 and to provide for expenditures for an investment in an additional joint venture. Interest expense was $2.7 million in the first quarter of fiscal year 1997 and $2.9 million in the first quarter of fiscal year 1996. The decrease results from lower borrowings outstanding under the Company's U.K. Credit Agreement. Miscellaneous, net was income of $5.2 million in the first quarter of fiscal year 1997 as compared to an expense of $0.1 million in the first quarter of fiscal year 1996. Miscellaneous, net in the first quarter of fiscal year 1997 includes interest income on the refund of prior years' income taxes amounting to $3.5 million and a $1.7 million gain on the sale of fixed assets. Miscellaneous, net in the first quarter of fiscal year 1996 includes a $0.2 million gain on the sale of marketable securities. In the first quarter of fiscal year 1997, the Company recognized the net benefit of a refund of prior years' income taxes amounting to $19.7 million. The refund relates to the carryback of tax net operating losses. The Company recorded no provision or benefit for income taxes in the first quarter of fiscal year 1996. Net income was $7.8 million, or $.21 per share, in the first quarter of fiscal year 1997 and $5.1 million, or $.14 per share in the first quarter of fiscal year 1996. The $2.7 million improvement results from the items described above. LIQUIDITY AND CAPITAL RESOURCES The decrease in the Company's cash of $2.2 million to $27.9 million at August 31, 1996 from $30.1 million at May 31, 1996 resulted primarily from cash provided by operating activities of $3.7 million and the issuance of common stock of $1.4 million, offset by capital expenditures of $7.2 million. The increase in the Company's working capital of $9.0 million to $125.5 million as of August 31, 1996 from $116.5 million as of May 31, 1996 resulted primarily from net income of $7.8 million, a decrease in other assets of $3.0 million, a decrease in intangible assets of $0.2 million, net proceeds from the issuance of Common Stock of $1.4 million, other changes in stockholders' equity of $0.2 million and an increase in long-term -11- 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) benefit liabilities of $2.2 million, offset by net increases in fixed assets of $1.5 million, a decrease in deferred taxes and other of $3.6 million and a decrease in long-term restructuring, integration, disposal and environmental of $0.7 million. Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased $16.4 million to $(4.2) million in the first quarter of fiscal year 1997 from $12.2 million in the first quarter of fiscal year 1996. This decrease reflects primarily the $15.8 million of other charges provided in the first quarter of fiscal year 1997. In the first quarter of fiscal year 1997, the Company recorded other charges of $15.8 million, of which $10.1 million was non-cash and $5.7 million is expected to require the use of cash during the remainder of fiscal year 1997 and the fiscal year ending May 31, 1998, $2.2 million to pay severance and other employee costs and $3.5 million to dispose of certain equipment. As of May 31, 1996, the Company estimated the remaining cash requirements for the integration of Cameron and direct costs associated with the acquisition of Cameron to be $4.0 million. Of such amount, the Company expects to spend approximately $2.5 million during its fiscal year ending May 31, 1997 ("fiscal year 1997") and $1.5 million thereafter. In the first quarter of fiscal year 1996, spending related to the integration of Cameron and associated direct costs amounted to $0.5 million. The Company expects to spend $1.2 million in fiscal year 1997 and $15.5 million thereafter on non-capitalizable environmental activities. In the first quarter of fiscal year 1997, $0.1 million was expended for non-capitalizable environmental projects. The Company has completed all environmental projects within established timetables and is continuing to do so at the present time. The Company from time to time expends cash on capital expenditures for more cost effective operations, environmental projects and joint development programs with customers. Capital expenditures amounted to $18.3 million for the year ended May 31, 1996 ("fiscal year 1996"). Capital expenditures in the foreseeable future are expected to increase somewhat from fiscal year 1996 levels. In the first quarter of fiscal year 1997, capital expenditures amounted to $7.2 million. The Company's revolving receivables-backed credit facility (the "Receivables Financing Program") provides the Company with an aggregate maximum borrowing capacity under the Receivables Financing Program of $65.0 million, with a letter of credit sub- limit of $35.0 million. The term of the Receivables Financing -12- 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) program is five years, with an evergreen feature. As of August 31, 1996, under the credit facility, the total availability based on eligible receivables was $42.5 million, there were no borrowings and letters of credit amounting to $9.0 million were outstanding. Wyman-Gordon Limited, the Company's subsidiary located in Livingston, Scotland, entered into a credit agreement ("the U.K. Credit Agreement"). The maximum borrowing capacity under the U.K. Credit Agreement is 6.0 million pounds sterling with a separate letter of credit or guarantee limit of 1.0 million pounds sterling. The term of the U.K. Credit Agreement is one year with an evergreen feature. There were no borrowings outstanding at August 31, 1996 and the Company had issued 0.9 million pounds sterling or $1.4 million of letters of credit or guarantees under the U.K. Credit Agreement. In the first quarter of fiscal year 1997, the Company recognized the net benefit of a refund of prior years' income taxes amounting to $19.7 million, plus interest of $3.5 million. In September of 1996, the Company received $20.3 million relating to such refund. Previously, the Company had received $2.9 million related to certain refund claims filed. The refund relates to the carryback of tax net operating losses to tax years 1981, 1994 and 1986 under the provisions of Internal Revenue Code Section 172(f). The amount of net operating losses carried back to such years was approximately $48.5 million. At August 31, 1996, the Company has approximately $38.0 million of net operating loss carryforwards available to offset future taxable income. The primary sources of liquidity available to the Company in fiscal year 1996 to fund operations, anticipated expenditures in connection with workforce reductions and disposal of certain equipment, the integration of Cameron, planned capital expenditures and planned environmental expenditures include available cash ($27.9 million at August 31, 1996), borrowing availability under the Company's Receivables Financing Program, cash generated by operations and reductions in working capital requirements through planned inventory reductions and accounts receivable management. Cash from operations and debt are expected to be the Company's primary sources of liquidity beyond fiscal year 1997. The Company believes that it has adequate resources to provide for its operations and the funding of restructuring, integration, capital and environmental expenditures. -13- 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) The Company's current plans to improve operating results include completing the integration of Cameron, further reductions of personnel and various other cost reduction measures. Programs to expand the Company's revenue base include participation in new aerospace programs and expansion of participation in the land- based gas turbine and extruded pipe markets and other markets in which the Company has not traditionally participated. The Company anticipates that, in addition to the growth in commercial aviation, the aging current commercial airline fleet will require future orders for its replacement. IMPACT OF INFLATION The Company's earnings may be affected by changes in price levels and in particular, changes in the price of basic metals. The Company's contracts generally provide for fixed prices for finished products with limited protection against cost increases. The Company would therefore be affected by changes in prices of the raw materials during the term of any such contract. The Company attempts to minimize this risk by entering into fixed price arrangements with raw material suppliers. ACCOUNTING AND TAX MATTERS Effective June 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121") which must be adopted by the Company no later than fiscal year 1997. SFAS 121 prescribes the accounting for the impairment of long-lived assets that are to be held and used in the business and similar assets to be disposed of. The adoption has not had a material impact on the earnings or the financial position of the Company. The Company for several years maintained a program of Company-owned life insurance ("COLI") for certain of its employees. As of August 31, 1996, the Company is named as beneficiary on COLI policies with an aggregate cash surrender value of approximately $5.2 million, issued by Confederation Life Insurance Company (U.S.), which is currently in rehabilitation. Confederation Life Insurance Company is continuing to pay benefits under the policies but has ceased to redeem cash surrender values. No assurances can be given regarding to what extent the Company will be able to realize such cash surrender values in the future. -14- 15 Part II. Item 6. EXHIBITS AND REPORTS FILED ON FORM 8-K (a) Exhibits The following exhibits are being filed as part of this Form 10-Q:
EXHIBIT NO. DESCRIPTION PAGE 10.A Form of Performance Stock Option E-1 Agreement under the Wyman-Gordon Long-term Incentive Plan dated July 16, 1996 granted to 13 employees to the Company for an aggregate of 485,875 shares of the Company's Common Stock. 10.B Form of Performance Share Agreement E-2 under the Wyman-Gordon Long-term Incentive Plan dated July 16, 1996 granted to 13 employees of the Company for an aggregate of 118,300 shares of the Company's Common Stock. 10.C Form of Stock Option Agreement under E-3 the Wyman-Gordon Long-term Incentive Plan dated July 16, 1996 granted to 13 employees of the Company for an aggregate of 105,625 shares of the Company's Common Stock. 27 Financial Data Schedule for the Three E-4 Months Ended August 31, 1996.
(b) No reports on Form 8-K have been filed with the Commission during the period covered by this report. -15- 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WYMAN-GORDON COMPANY Date: 10/10/96 By: /S/ANDREW C. GENOR Andrew C. Genor Vice President, Chief Financial Officer and Treasurer Date: 10/10/96 By: /S/JEFFREY B. LAVIN Jeffrey B. Lavin Corporate Controller and Chief Accounting Officer -16- EX-10.A 2 EX10A-FORM OF PERF STOCK AGREEMENT 1 EXHIBIT 10.A FORM OF PERFORMANCE STOCK OPTION AGREEMENT UNDER THE WYMAN-GORDON COMPANY LONG-TERM INCENTIVE PLAN WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company"), hereby grants to (the "Grantee"), who is now employed by the Company or by a Subsidiary of the Company, a Non-qualified Stock Option (the "Option") to purchase prior to July 16, 2006 (the "Expiration Date") an aggregate of 37,375 shares of Common Stock of the Company ("Shares") at a price of $16.75 per Share pursuant to the terms and conditions set forth in the Wyman- Gordon Company Long-Term Incentive Plan as approved by the stockholders of the Company on October 18, 1995, as it may be amended from time to time in accordance with its terms (the "Plan") and this Stock Option Agreement, as it may be amended from time to time in accordance with its terms (the "Award Agreement"). By execution of this Award Agreement, the Grantee acknowledges receipt of copy of the Plan and further agrees to be bound thereby and by the actions, pursuant to the Plan, of the Committee referred to in the Plan (the "Committee") and of the Wyman-Gordon Company Board of Directors. (1) The Option is in all respects governed by the terms of the Plan. All of the terms and provisions of the Plan are hereby incorporated into this Award Agreement by reference and are made a part of this Award Agreement. For the convenience of the Grantee, certain but not all of the provisions of the Plan are also summarized or elaborated upon in this Award Agreement. Each and every provision of this Award Agreement shall be administered, interpreted, and construed so that the Option shall conform to the provisions of the Plan. Any provisions of this Award Agreement that cannot be so administered, interpreted, or construed shall be disregarded, and, accordingly, in the event of any conflict between the Award Agreement and the Plan, the latter will govern. Any capitalized terms used herein and not defined herein have the respective meanings ascribed to them in the Plan. Whenever the word "Grantee" is used herein in a context where the provision should logically be construed to apply to the Grantee's Beneficiary, the word "Grantee" shall be deemed to include such Beneficiary. (2) The date of grant of the Option is July 16, 1996. (3) The Option is a Non-qualified Stock Option and is not an Incentive Stock Option. (4) Subject to the terms of this Award Agreement, the Option shall be exercisable from and after July 16, 2003; provided, however, that the option may be exercised by the Grantee at any time after January 16, 1997 with respect to the number of shares set forth below if the average closing price during a period of 30 consecutive business days of the Common Stock of the Company, par value $1.00 per share, on the NASDAQ National Market System, or on any successor market or exchange in which the Common Stock is publicly traded, as quoted in the WALL STREET JOURNAL reaches the indicated price levels. E-1 2
CUMULATIVE NUMBER OF STOCK PRICE OPTIONS VESTED Below $21.00 0 21.00 1,869 22.00 3,738 23.00 7,475 24.00 13,081 25.00 18,688 26.00 24,294 27.00 29,900 28.00 33,368 29.00 35,506 30.00 or above 37,375
(5) Grantee may exercise the Option only in the following manner: From time to time prior to the Expiration Date and subject to the provisions of Paragraph 4 above, the Grantee may give written notice to the Treasurer of the Company of his election to purchase some or all of the Shares purchasable at the time of such notice. Said notice shall specify the number of Shares to be purchased and shall be accompanied by payment therefor (a) in U.S. dollars by personal check, bank draft, or money order payable to the order of the Company; (b) in Shares that have been held by the Grantee for at least six (6) months and that have a Fair Market Value equal to the purchase price; (c) to the extent not limited or prohibited by the Committee, by payment made by the Grantee's broker, in U.S. dollars by personal check, bank draft, or money order payable to the order of the Company, pursuant to the Grantee's instructions; or (d) by a combination thereof; and by any agreement, statement, or other evidence that the Committee may require in order to satisfy itself that the issuance of the Shares being purchased pursuant to such exercise and any subsequent resale thereof will be in compliance with applicable laws and regulations relating to the issuance and sale of securities, including the provisions of the Securities Act of 1933 and regulations promulgated thereunder. (6) The exercise of the Option shall be deemed to occur (a) on the date that the notice of exercise and the personal check, bank draft, money order or Shares are received by the Company, or (b) if such notice of exercise and payment are mailed in the United States, and the United States Postal Service has stamped its postmark thereon, then on the date of such postmark. As soon as practicable after each exercise of the Option and compliance by the Grantee with all applicable conditions, including any payments to the Company that may be required pursuant to Paragraphs 5 and 7 hereof, the Company shall mail or deliver or cause to be mailed or delivered to the Grantee a stock certificate or certificates for the number of Shares that the Grantee shall be entitled to receive upon such exercise under the provisions of this Award Agreement. -2- 3 (7) In each case where the Grantee shall exercise the Option, in whole or in part, the Company will notify the Grantee of the amount of withholding tax, if any, that must be paid under Federal and, where applicable, state and local law, by reason of such exercise. It shall be a condition to any delivery of Shares or payment to be made to the Grantee hereunder that provision satisfactory to the Company shall have been made for payment of any taxes the Company determines, in its reasonable opinion, are required to be paid or withheld pursuant to any applicable law or regulation. The Grantee may irrevocably elect to have any withholding tax obligation satisfied by either of the methods described in clause (a) or (c) of Paragraph 5, above, or a combination thereof, whether or not the same method is used to pay the purchase price of the Option. As an alternative to such an election with respect to all or any part of the withholding tax obligation, the Company and its Subsidiaries also shall, to the extent permitted by law, have the right to deduct from any payment or transfer of any kind (whether of cash, Shares, or other property, and whether or not related to the Plan) otherwise due to the Grantee any such taxes required to be withheld. (8) This Award Agreement and the Grantee's right to exercise the Option shall terminate, as to any portion of the Option not theretofore exercised, whenever the Grantee is for any reason no longer employed by the Company or a Subsidiary; subject, however, to the following provisions: (a) If the Company or a Subsidiary terminates the Grantee's employment for reasons other than fraud, dishonesty, willful misconduct, retirement, or disability, or if the Grantee resigns from the Company and the Subsidiaries (as applicable), the Grantee shall have a period of 90 days immediately after such termination in which to exercise the Option to the extent then exercisable. The Option shall not become exercisable with respect to any Shares with respect to which it was not exercisable on the date of such termination of employment. (b) If the termination of Grantee's employment results from the Grantee's death, retirement or disability, the Grantee (or his Beneficiary in the case of his death) shall have a period of three years following such termination to exercise in whole or in part the Option with respect to Shares subject to the Option, to the extent then exercisable. The Option shall not become exercisable with respect to any Shares with respect to which it was not exercisable on the date of such termination of employment. (c) If the Grantee dies during the three-year period following retirement or disability referred to in Subsection (b) above, the Option may be exercised in whole or in part by his Beneficiary before the expiration of one year after the date of his death or the expiration of the three-year period following retirement or disability referred to in Subsection (b) above, whichever occurs later. -3- 4 For purposes of this Paragraph 8, the term "retirement" shall mean termination of employment after the Grantee has become eligible for an early, normal or late retirement benefit (but not a terminated vested or deferred vested benefit) under the tax- qualified deferred benefit pension plan maintained by the Company and/or its Subsidiaries that covers the Grantee, and the term "disability" shall have the meaning ascribed to it in the Wyman- Gordon Company Savings/Investment Plan. (9) The Option is nontransferable other than by will or by the laws of descent and distribution, and the Option may be exercised during the lifetime of the Grantee only by him. (10) In the event that there is any change in the Shares through merger, consolidation, reorganization, recapitalization, or otherwise; or if there shall be any dividend on the Shares, payable in Shares, or an extraordinary cash dividend or other extraordinary distribution; or if there shall be a stock split, reverse stock split, combination of Shares, exercisability of stock purchase rights received under the Company's Stockholder Rights Plan, or other similar corporate transaction or event that affect the Shares, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the rights of the Grantee or of the potential benefits intended to be made available under the Plan, the number and kind of Shares subject to the Option, the purchase price, and the other relevant provisions of this Award Agreement shall be appropriately adjusted as provided in Section 12 of the Plan. (11) As provided in Section 25 of the Plan in the event of a Triggering Event, as hereinafter defined, the Option, to the extent it has not theretofore been exercised, shall be fully exercisable without regard to the schedule in Paragraph 4 above, but the Option shall thereupon become a Limited Right, as hereinafter defined, and the terms thereof shall be modified as described in the remaining provisions of this Paragraph 11. In the event of a Triggering Event, the Grantee shall have the right (the "Limited Right") to have the Company, at the election of the Grantee (which election for each Triggering Event, as hereinafter defined, may be made only during the period beginning on the effective date of such Triggering Event, as hereinafter defined, and ending on the 45th day following such date), purchase all or any Shares subject to the Option (to the extent not theretofore exercised) for an amount (payable entirely in cash) equal to the number of Shares with respect to which the Limited Right is exercised, multiplied by the excess of the higher of (a) the highest Fair Market Value of a Share during the period commencing on the ninetieth (90th) day preceding the exercise of the Limited Right and ending on the date of exercise and (b) either (i) if an event described in clause (a) of the definition of "Triggering Event," below, has occurred, the highest price per Share paid for any Share as shown on Schedule 13D (or an amendment thereto) filed pursuant to Section 13(d) of the 1934 Act by any person or group (as defined in that definition) whose acquisition cause the -4- 5 Triggering Event to occur, or (ii) if an event described in clause (b) of the definition of "Triggering Event," below, has occurred, the fixed or formula price specified in the reorganization agreement (as defined in that definition) if such price is determinable as of the date of exercise of the Limited Right over the purchase price of the Option. Such purchase pursuant to the exercise of a Limited Right shall be deemed to be an exercise of the Option. Notwithstanding any other provision of this Award Agreement, no Limited Right may be exercised after the Expiration Date, but a Limited Right may be exercised within six months of the date hereof. For purposes of this Paragraph 11, a Triggering Event shall be deemed to occur when and if any of the following events occurs: (a) stockholder approval of a merger or consolidation involving the Company or a sale of all or substantially all of the assets of the Company, in each case except for a transaction in which the Company's shareholders receive at least 50% of the stock of the surviving, resulting or acquiring corporation; (b) any "person" (other than the Company or an employee benefit plan of the Company or a corporation controlled by an employee benefit plan of the Company or a corporation controlled by the Company's shareholders) becomes the "beneficial owner" of shares of capital stock of the Company representing a majority of the votes entitled to be cast on matters submitted to the shareholders of the Company; or (c) persons who, as of July 16, 1996, constituted the Company's Board (the "Incumbent Board") cease for any reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to July 16, 1996 whose election was approved by a least a majority of the directors then comprising the Incumbent Board shall, for purposes of this Agreement, be considered a member of the Incumbent Board. For purposes of this paragraph, the term "person" shall have the meaning used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "1934 Act") and "beneficial ownership" shall have the meaning set forth in Rule 13d-3 of the 1934 Act. (12) Notices hereunder shall be mailed or delivered to the Treasurer of the Company at its principal place of business at Grafton, Massachusetts, and shall be mailed or delivered to Grantee at his address set forth below or at such other address as he may subsequently furnish the Treasurer of the Company in writing. (13) The Grantee shall not have any rights of a shareholder by virtue of the Option except with respect to Shares actually issued to him, and the issuance of Shares shall confer no retroactive right to dividends. (14) The Committee may not, without the written consent of the Grantee, cause this Award Agreement to be revoked, and may not without such written consent make or change any determination or change any term, condition or provision affecting the Option if the determination or change would reduce or adversely affect the Option or the Grantee's rights thereto. -5- 6 (15) Notwithstanding anything herein to the contrary, on or after the occurrence of a Triggering Event, as defined above, the Committee may not under any circumstances make or change any determination or change any term, condition, or provision affecting the Option if the determination or change would reduce or adversely affect the Option or the Grantee's rights thereto. (16) The Grantee shall designate a Beneficiary in writing and in such manner as is acceptable to the Company. If the Grantee fails so to designate a Beneficiary, or if no such designated Beneficiary survives the Grantee, the Grantee's beneficiary shall be the Grantee's estate. (17) The exercise of the Option shall be subject to the condition that if at any time the Company shall determine (in accordance with the provisions of the following sentence) that it is necessary as a condition of, or in connection with, such exercise (a) to satisfy withholding tax or other withholding liabilities, (b) to effect the listing, registration, or qualification on any securities exchange or under any state or Federal law of any Shares otherwise deliverable in connection with such exercise, or (c) to obtain the consent or approval of any regulatory body, then in any such event such exercise shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its reasonable and good faith judgment. Any such determination (described in the preceding sentence) by the Company must be reasonable, must be made in good faith, and must be made without any intent to postpone or limit such exercise, grant or distribution beyond the minimum extent necessary and without any intent otherwise to deny or frustrate the Grantee's rights in respect of the Option. In seeking to effect or obtain any such withholding, listing, registration, qualification, consent or approval, the Company shall act with all reasonable diligence. Any such postponement or limitation affecting the right to exercise the Option shall not extend the time within which the Option may be exercised, unless the Company and the Grantee choose to amend the terms of this Award Agreement to provide for such an extension; and neither the Company nor its directors or officers shall have any obligation or liability to the Grantee with respect to any Shares with respect to which the Option shall lapse, because of a postponement or limitation that conforms to the provisions of this Paragraph 17. (18) No fractional Shares shall be issued pursuant to this Award Agreement. The Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of fractional Shares, or whether fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. -6- 7 (19) Nothing in this Award Agreement shall confer upon the Grantee the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) the Grantee at any time for any reason. The grant of the Option shall not give the Grantee any right to similar grants in future years. (20) So long as this Award Agreement shall remain in effect, the Company shall furnish to the Grantee, as and when available, a copy of any Prospectus issued with respect to the Shares covered hereby, and also a copy of all material hereinafter distributed by the Company to its stockholders generally. (21) This Award Agreement and the provisions thereof shall be binding upon, and inure to the benefit of, any successor or successors of the Company and the person or entity to whom the Option may have been transferred by will, the laws of descent and distribution, or beneficiary designation hereunder. (22) The Award Agreement shall be governed and its provisions construed, enforced and administered in accordance with the laws of the Commonwealth of Massachusetts except to the extent that such laws may be superseded by any Federal law. It may not be modified orally. WYMAN-GORDON COMPANY By: /S/DAVID P. GRUBER David P. Gruber President and Chief Executive Officer The foregoing Award Agreement is hereby accepted and the terms thereof hereby agreed to. GRANTEE Grantee's Signature GRANTEE'S ADDRESS: SOCIAL SECURITY NUMBER: -7- ?? EX-10.B 3 EX10B-FORM OF PERF SHARE AGREEMENT 1 EXHIBIT 10.B FORM OF PERFORMANCE SHARE AGREEMENT UNDER THE WYMAN-GORDON LONG-TERM INCENTIVE PLAN This Agreement is made as of the 16th day of July 1996 between WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company") and (the "Grantee"), relating to 9,100 shares (the "Shares") of the Company's common stock, par value $1.00 per share (the "Common Stock") to be issued by the Company to the Grantee pursuant to the terms and conditions set forth in the Wyman-Gordon Company Long-Term Incentive Plan, as it may be amended from time to time in accordance with its terms (the "Plan") and this Performance Share Agreement, as it may be amended from time to time in accordance with its terms (the "Agreement") in consideration of services heretofore rendered and to be rendered by Grantee to the Company during the term of this Agreement. By execution of this Agreement, the Grantee acknowledges receipt of a copy of the Plan and further agrees to be bound thereby and by the actions, pursuant to the Plan, of the Committee referred to in the Plan (the "Committee") and of the Company's Board of Directors. 1. On the date hereof the Company shall issue the Shares to the Grantee which shall be subject to risk of loss and forfeiture during a period beginning on the date hereof and ending on July 16, 2001 (the "Term of this Agreement"). During the Term of this Agreement, the Committee shall determine the average closing price of the Common Stock on the NASDAQ National Market System, or on any successor market or exchange in which the Common Stock is publicly traded, as quoted in the WALL STREET JOURNAL during each period of 30 consecutive business days during the Term of this Agreement, each such period being referred to herein as a "Measurement Period" and the average prices being referred to herein as the "Target Price." Restrictions on all or a portion of the Shares will lapse only if the Target Price during a Measurement Period has reached the amounts set forth below:
CUMULATIVE NUMBER OF SHARES ON WHICH TARGET PRICE RESTRICTIONS WILL LAPSE Below $21.00 0 21.00 455 22.00 910 23.00 1,820 24.00 3,185 25.00 4,550 26.00 5,915 27.00 7,280 28.00 8,190 29.00 8,645 30.00 and above 9,100
E-2 2 Upon achieving a Target Price for a Measurement Period as set forth above, the restrictions set forth above and in Section 3 below shall lapse with respect to the number of Shares indicated in the table as to which restrictions have not previously lapsed. At the end of the Term of this Agreement, Grantee shall forfeit all right, title and interest in the Shares to the extent that the Target Price with respect to such Shares has not been attained. 2. The Grantee acknowledges receipt of a stock certificate registered in his name for the Shares and bearing a legend setting forth the restrictions set forth in Section 1 of this Agreement. The Grantee agrees, concurrently with the execution of this Agreement, to deposit such stock certificate with the Company together with a stock power relating thereto endorsed in blank. 3. The Grantee acknowledges that the Shares may not be sold, assigned, transferred, conveyed, pledged or otherwise encumbered during the Term of this Agreement except in accordance with the provisions of this Agreement. If the Grantee ceases to be employed by the Company prior to the end of the Term of this Agreement, his rights to the Shares to the extent restrictions have not previously lapsed as provided above in Section 1 will thereupon be forfeited and revert to the Company. 4. Upon the attainment of the Target Price as provided in Section 1 and the satisfaction of all other conditions contained in this Agreement, the restrictions applicable to the designated number of Shares shall lapse and a stock certificate for the number of Shares with respect to which the restrictions have lapsed shall be delivered to the Grantee, free of all such restrictions except any that may be imposed by law. Any Shares as to which the restrictions shall not have lapsed at the end of the Term of this Agreement shall be transferred to the Company without any further action of the Grantee. 5. If an event of a Change of Control, as defined below, shall occur, the Committee in its sole discretion may, but need not, determine that the restrictions not previously lapsed and terminated shall be deemed lapsed and terminated with respect to some or all of the Shares and such Shares, if any as determined by the Committee, shall not be forfeited and shall vest in the Grantee upon such terms and conditions as the Committee may determine. "Change in Control" means any one of the following events: (1) stockholder approval of a merger or consolidation involving the Company or a sale of all or substantially all of the assets of the Company, in each case except for a transaction in which the Company's shareholders receive at least 50% of the stock of the surviving, resulting or acquiring corporation; (2) any "person" (other than the Company or an employee benefit plan -2- 3 of the Company or a corporation controlled by the Company's employee benefit plan of the Company or a corporation controlled by the Company's stockholders) becomes the "beneficial owner" of shares of capital stock of the Company representing a majority of the votes entitled to be cast on matters submitted to the shareholders of the Company; or (3) persons who, as of July 16, 1996, constituted the Company's Board (the "Incumbent Board") cease for any reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to July 16, 1996 whose election was approved by at least a majority of the directors then comprising the Incumbent Board shall for purposes of this Agreement, be considered a member of the Incumbent Board. For purposes of this paragraph, the term "person" shall have the meaning used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 as amended (the "1934 Act"), and "beneficial ownership" shall have the meaning set forth in Rule 13d-3 of the 1934 Act. 6. The Grantee shall have all voting and dividend rights with respect to the Shares, provided that non-cash dividends shall be deposited with the Company together with a stock power or other appropriate instrument of transfer endorsed in blank and shall be subject to the same restrictions as the Shares. 7. If the Grantee properly elects, within 30 days of the date of this Agreement, to include in gross income for federal income tax purposes an amount equal to the aggregate value of the Shares subject to the Award based on the closing price of the Stock on the date of this Agreement, Grantee shall make arrangements satisfactory to the Committee to pay to the Company any federal, state or local taxes required to be withheld with respect to such Shares. If the Grantee shall fail to make such tax payments as are required, the Company, shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares. If the Grantee does not make the election described above in this Section 7, Grantee shall, no later than the date as of which the restrictions referred to in Section 1 and such other restrictions as may have been imposed under this Agreement, shall lapse, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares, and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares. -3- 4 Any tax withholding may be satisfied, at the discretion of the Committee, by the Company's withholding Shares, otherwise deliverable to Grantee hereunder with a Fair Market Value (as defined in the Plan) equal to all or a portion of the amount to be withheld. At the sole discretion of the Committee, the Company may make a loan to Grantee in such amount as may be required to discharge his federal income tax liability on account of the lapsing of restrictions under Section 1 above assuming the resulting income is taxable at the maximum applicable individual federal income tax rate. Such loan shall have such maturity and other terms and conditions as the Committee shall determine in its sole discretion, and shall bear interest at the applicable federal rate under Section 1274(d) of the Internal Revenue Code of any successor provision thereto. 8. The issuance of the Shares to Grantee shall be subject to the condition that if at any time the Company shall determine (in accordance with the provisions of the following sentence) that it is necessary as a condition of, or in connection with, such exercise (a) to satisfy withholding tax or other withholding liabilities, (b) to effect the listing, registration, or qualification on any securities exchange or under any state or Federal law of any Shares otherwise deliverable in connection with such exercise, or (c) to obtain the consent or approval of any regulatory body, then in any such event such exercise shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free or any conditions not acceptable to the Company in its reasonable and good faith judgment. 9. This Agreement is in all respects governed by the terms of the Plan. All of the terms and provisions of the Plan are hereby incorporated into this Agreement by reference and are made a part of this Agreement. Each and every provision of this Agreement shall be administered, interpreted and construed so that this Agreement shall conform to the provisions of the Plan. Any provisions of this Agreement that cannot be so administered, interpreted, or construed shall be disregarded, and, accordingly, in the event of any conflict between this Agreement and the Plan, the latter will govern. Any capitalized terms used herein and not defined herein have the respective meanings ascribed to them in the Plan. Whenever the word "Grantee" is used herein in a context where the provision should logically be construed to apply to the Grantee's beneficiary, the word "Grantee" shall be deemed to include such Beneficiary. -4- 5 10. In the event that there is any change in the Company Common Stock through merger, consolidation, reorganization, recapitalization, or otherwise; or if there shall be any dividend on the Shares, payable in Shares, or an extraordinary cash dividend or other extraordinary distribution; or if there shall be a stock split, reverse stock split, combination of Shares, exercisability of stock purchase rights received under the Company's Stockholder Rights Plan, or other similar corporate transaction or event that affects the Shares, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the rights of the Grantee or of the potential benefits intended to be made available under this Agreement, the number and kind of Shares and the other relevant provisions of this Agreement shall be appropriately adjusted as provided in Section 12 of the Plan. 11. Notices hereunder shall be mailed or delivered to the Treasurer of the Company at its principal place of business at Grafton, Massachusetts, and shall be mailed or delivered to Grantee at his address set forth above or at such other address as he may subsequently furnish the Treasurer of the Company in writing. 12. The Committee may not, without the written consent of the Grantee, cause this Agreement to be revoked, and may not without such written consent make or change any determination or change any term, condition or provision hereunder if the determination or change would reduce or adversely affect the Grantee's rights hereunder. 13. Notwithstanding anything herein to the contrary, on or after the occurrence of a Change in Control, as defined above, the Committee may not under any circumstances make or change any determination or change any term, condition, or provision affecting this Agreement if the determination or change would reduce or adversely affect the Grantee's rights hereunder. 14. The Grantee shall designate a Beneficiary in writing and in such manner as is acceptable to the Company. If the Grantee fails so to designate a Beneficiary, or if no such designated Beneficiary survives the Grantee, the Grantee's beneficiary shall be the Grantee's estate. 15. Nothing in this Agreement shall confer upon the Grantee the right to continue in the employment or service of the Company or affect any right that the Company may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) the Grantee at any time for any reason. -5- 6 16. So long as this Agreement shall remain in effect, the Company shall furnish to the Grantee, as and when available, a copy of any Prospectus issued with respect to the Shares covered hereby, and also a copy of all material hereinafter distributed by the Company to its stockholders generally. 17. This Agreement is nontransferable by Grantee other than by will or by the laws of descent and distribution. This Agreement and the provisions thereof shall be binding upon, and inure to the benefit of, any successor or successors of the Company and the person or entity to whom his rights hereunder may have been transferred by will, the laws of descent and distribution, or beneficiary designation hereunder. 18. This Agreement shall be governed and its provisions construed, enforced and administered in accordance with the laws of the Commonwealth of Massachusetts except to the extent that such laws may be superseded by any Federal law. It may not be modified orally. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. WYMAN-GORDON COMPANY By: /S/DAVID P. GRUBER David P. Gruber President and Chief Executive Officer GRANTEE Grantee's Signature -6- ?? EX-10.C 4 EX10C-FORM OF STOCK OPTION AGREEMENT 1 EXHIBIT 10.C STOCK OPTION AGREEMENT UNDER THE WYMAN-GORDON COMPANY LONG-TERM INCENTIVE PLAN WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company"), hereby grants to (the "Grantee"), who is now employed by the Company or by a Subsidiary of the Company, a Non-qualified Stock Option (the "Option") to purchase prior to July 16, 2006 (the "Expiration Date") an aggregate 8,125 shares of Common Stock of the Company ("Shares") at a price of $16.75 per Share pursuant to the terms and conditions set forth in the Wyman-Gordon Company Long-Term Incentive Plan as approved by the stockholders of the Company on October 18, 1995, as it may be amended from time to time in accordance with its terms (the "Plan") and this Stock Option Agreement, as it may be amended from time to time in accordance with its terms (the "Award Agreement"). By execution of this Award Agreement, the Grantee acknowledges receipt of a copy of the Plan and further agrees to be bound thereby and by the actions, pursuant to the Plan, of the Committee referred to in the Plan (the "Committee") and of the Wyman-Gordon Company Board of Directors. (1) The Option is in all respects governed by the terms of the Plan. All of the terms and provisions of the Plan are hereby incorporated into this Award Agreement by reference and are made a part of this Award Agreement. For the convenience of the Grantee, certain but not all of the provisions of the Plan are also summarized or elaborated upon in this Award Agreement. Each and every provision of this Award Agreement shall be administered, interpreted, and construed so that the Option shall conform to the provisions of the Plan. Any provisions of this Award Agreement that cannot be so administered, interpreted, or construed shall be disregarded, and, accordingly, in the event of any conflict between the Award Agreement and the Plan, the latter will govern. Any capitalized terms used herein and not defined herein have the respective meanings ascribed to them in the Plan. Whenever the word "Grantee" is used herein in a context where the provision should logically be construed to apply to the Grantee's Beneficiary, the word "Grantee" shall be deemed to include such Beneficiary. (2) The date of grant of the Option is July 16, 1996. (3) The Option is a Non-qualified Stock Option and is not an Incentive Stock Option. (4) Subject to the terms of this Award Agreement, the Option shall be exercisable from and after each initial exercise date set forth below with respect to the indicated number of Shares: E-3 2
INITIAL NUMBER OF SHARES EXERCISE DATE One quarter of the aggregate number July 16, 1997 of Shares subject to the Option, as specified above, in the first sentence of the Award Agreement, rounded down to the nearest whole Share. An additional one quarter of the July 16, 1998 aggregate number of Shares subject to the Option, as specified above, in the first sentence of the Award Agreement, rounded down (after taking into account any fractional Share that was disregarded as a result of rounding pursuant to the preceding provision) to the nearest whole Share. The additional one quarter of the July 16, 1999 aggregate number of Shares subject to the Option, as specified above, in the first sentence of the Award Agreement, rounded down (after taking into account any fractional Share that was disregarded as a result of rounding pursuant to the preceding provision) to the nearest whole Share. The remaining number of Shares subject July 16, 2000 to the Option, as specified above, in the first sentence of the Award Agreement.
(5) The Grantee may exercise the Option only in the following manner: From time to time prior to the Expiration Date, the Grantee may give written notice to the Treasurer of the Company of his election to purchase some or all of the Shares purchasable at the time of such notice. Said notice shall specify the number of Shares to be purchased and shall be accompanied by payment therefor (a) in U.S. dollars by personal check, bank draft, or money order payable to the order of the Company; (b) in Shares that have been held by the Grantee for at least six months and that have a Fair Market Value equal to the purchase price; (c) to the extent not limited or prohibited by the Committee, by payment made by the Grantee's broker, in U.S. dollars by personal check, bank draft, or money order payable to the order of the Company, pursuant to the Grantee's instructions; or (d) by a combination thereof; and by any agreement, statement, or other evidence that the Committee may require in order to satisfy itself that the issuance of the Shares being purchased pursuant to such exercise and any subsequent resale thereof will be in compliance with applicable laws and regulations relating to the issuance and sale of securities, including the provisions of the Securities Act of 1933 and regulations promulgated thereunder. -2- 3 (6) The exercise of the Option shall be deemed to occur (a) on the date that the notice of exercise and the personal check, bank draft, money order and/or Shares are received by the Company, or (b) if such notice of exercise and payment are mailed in the United States, and the United States Postal Service has stamped its postmark thereon, then on the date of such postmark. As soon as practicable after each exercise of the Option and compliance by the Grantee with all applicable conditions, including any payments to the Company that may be required pursuant to Paragraphs 5 and 7 hereof, the Company shall mail or deliver or cause to be mailed or delivered to the Grantee a stock certificate or certificates for the number of Shares that the Grantee shall be entitled to receive upon such exercise under the provisions of this Award Agreement. (7) In each case where the Grantee shall exercise the Option, in whole or in part, the Company will notify the Grantee of the amount of withholding tax, if any, that must be paid under Federal and, where applicable, state and local law, by reason of such exercise. It shall be a condition to any delivery of Shares or payment to be made to the Grantee hereunder that provision satisfactory to the Company shall have been made for payment of any taxes the Company determines, in its reasonable opinion, are required to be paid or withheld pursuant to any applicable law or regulation. The Grantee may irrevocably elect to have any withholding tax obligation satisfied by either of the methods described in clause (a) or (c) of Paragraph (5), above, or a combination thereof, whether or not the same method is used to pay the purchase price of the Option. As an alternative to such an election with respect to all or any part of the withholding tax obligation, the Company and its Subsidiaries also shall, to the extent permitted by law, have the right to deduct from any payment or transfer of any kind (whether of cash, Shares, or other property, and whether or not related to the Plan) otherwise due to the Grantee any such taxes required to be withheld. (8) This Award Agreement and the Grantee's right to exercise the Option shall terminate, as to any portion of the Option not theretofore exercised, whenever the Grantee is for any reason no longer employed by the Company or a Subsidiary; subject, however, to the following provisions: (a) If the Company or a Subsidiary terminates the Grantee's employment for reasons other than fraud, dishonesty, willful misconduct, retirement, or disability, or if the Grantee resigns from the Company and the Subsidiaries (as applicable), the Grantee shall have a period of ninety days immediately after such termination in which to exercise the Option to the extent then exercisable. The Option shall not become exercisable with respect to any Shares with respect to which it was not exercisable on the date of such termination of employment. -3- 4 (b) If the termination of Grantee's employment results from the Grantee's death, retirement or disability, the Grantee (or his Beneficiary in the case of his death) shall have a period of three years following such termination to exercise in whole or in part the Option with respect to Shares subject to the Option, to the extent then exercisable. The Option shall not become exercisable with respect to any Shares with respect to which it was not exercisable on the date of such termination of employment. (c) If the Grantee dies during the three-year period following retirement or disability referred to in Subsection (b) above, the Option may be exercised in whole or in part by his Beneficiary before the expiration of one year after the date of his death or the expiration of the three-year period following retirement or disability referred to in Subsection (b) above, whichever occurs later. For purposes of this Paragraph 8, the term "retirement" shall mean termination of employment after the Grantee has become eligible for an early, normal or late retirement benefit (but not a terminated vested or deferred vested benefit) under the tax- qualified deferred benefit pension plan maintained by the Company and/or its Subsidiaries that covers the Grantee, and the term "disability" shall have the meaning ascribed to it in the Wyman- Gordon Company Savings/Investment Plan. (9) The Option is nontransferable other than by will or by the laws of descent and distribution, and the Option may be exercised during the lifetime of the Grantee only by him. (10) In the event that there is any change in the Shares through merger, consolidation, reorganization, recapitalization, or otherwise; or if there shall be any dividend on the Shares, payable in Shares, or an extraordinary cash dividend or other extraordinary distribution; or if there shall be a stock split, reverse stock split, combination of Shares, exercisability of stock purchase rights received under the Company's Stockholder Rights Plan, or other similar corporate transaction or event that affects the Shares, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the rights of the Grantee or of the potential benefits intended to be made available under the Plan, the number and kind of Shares subject to the Option, the purchase price, and the other relevant provisions of this Award Agreement shall be appropriately adjusted as provided in Section 12 of the Plan. (11) As provided in Section 25 of the Plan in the event of a Triggering Event, as hereinafter defined, the Option, to the extent it has not theretofore been exercised, shall be fully exercisable without regard to the schedule in Paragraph 4 above, but the Option shall thereupon become a Limited Right, as hereinafter defined, and the terms thereof shall be modified as -4- 5 described in the remaining provisions of this Paragraph 11. In the event of a Triggering Event, the Grantee shall have the right (the "Limited Right") to have the Company, at the election of the Grantee (which election for each Triggering Event, as hereinafter defined, may be made only during the period beginning on the effective date of such Triggering Event, as hereinafter defined, and ending on the forty-fifth day following such date), purchase all or any Shares subject to the Option (to the extent not theretofore exercised) for an amount (payable entirely in cash) equal to the number of Shares with respect to which the Limited Right is exercised, multiplied by the excess of the higher of (a) the highest Fair Market Value of a Share during the period commencing on the ninetieth (90th) day preceding the exercise of the Limited Right and ending on the date of exercise and (b) either (i) if an event described in clause (b) of the definition of "Triggering Event," below, has occurred, the highest price per Share paid for any Share as shown on Schedule 13D (or an amendment thereto) filed pursuant to Section 13(d) of the 1934 Act by any person or group (as defined in that definition) whose acquisition caused the Triggering Event to occur, or (ii) if an event described in clause (a) of the definition of "Triggering Event," below, has occurred, the fixed or formula price specified in the reorganization agreement (as defined in that definition) if such price is determinable as of the date of exercise of the Limited Right over the purchase price of the Option. Such purchase pursuant to the exercise of a Limited Right shall be deemed to be an exercise of the Option. Notwithstanding any other provision of this Award Agreement, no Limited Right may be exercised after the Expiration Date, but a Limited Right may be exercised within six months of the date hereof. For purposes of this Paragraph 11, a Triggering Event shall be deemed to occur when and if any of the following events occurs: (a) stockholder approval of a merger or consolidation involving the Company or a sale of all or substantially all of the assets of the Company (each a "reorganization"), in each case except for a transaction in which the Company's shareholders receive at least 50% of the stock of the surviving, resulting or acquiring corporation; (b) any "person" (other than the Company or an employee benefit plan of the Company or a corporation controlled by the Company's employee benefit plan of the Company or a corporation controlled by the Company's shareholders) becomes the "beneficial owner" of shares of capital stock of the Company representing a majority of the votes entitled to be cast on matters submitted to the shareholders of the Company; or (c) persons who, as of July 16, 1996, constituted the Company's Board (the "Incumbent Board") cease for any reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to July 16, 1996 whose election was approved by at least a majority of the directors then comprising the Incumbent Board shall, for purposes of this Agreement, be considered a member of the Incumbent Board. For purposes of this paragraph, the term "person" shall have the meaning used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "1934 Act") and "beneficial ownership" shall have the meaning set forth in Rule 13d-3 of the 1934 Act. -5- 6 (12) Notices hereunder shall be mailed or delivered to the Treasurer of the Company at its principal place of business at Grafton, Massachusetts, and shall be mailed or delivered to Grantee at his address set forth below or at such other address as he may subsequently furnish the Treasurer of the Company in writing. (13) The Grantee shall not have any rights of a shareholder by virtue of the Option except with respect to Shares actually issued to him, and the issuance of Shares shall confer no retroactive right to dividends. (14) The Committee may not, without the written consent of the Grantee, cause this Award Agreement to be revoked, and may not without such written consent make or change any determination or change any term, condition or provision affecting the Option if the determination or change would reduce or adversely affect the Option or the Grantee's rights thereto. (15) Notwithstanding anything herein to the contrary, on or after the occurrence of a Triggering Event, as defined above, the Committee may not under any circumstances make or change any determination or change any term, condition, or provision affecting the Option if the determination or change would reduce or adversely affect the Option or the Grantee's rights thereto. (16) The Grantee shall designate a Beneficiary in writing and in such manner as is acceptable to the Company. If the Grantee fails so to designate a Beneficiary, or if no such designated Beneficiary survives the Grantee, the Grantee's beneficiary shall be the Grantee's estate. (17) The exercise of the Option shall be subject to the condition that if at any time the Company shall determine (in accordance with the provisions of the following sentence) that it is necessary as a condition of, or in connection with, such exercise (a) to satisfy withholding tax or other withholding liabilities, (b) to effect the listing, registration, or qualification on any securities exchange or under any state or Federal law of any Shares otherwise deliverable in connection with such exercise, or (c) to obtain the consent or approval of any regulatory body, then in any such event such exercise shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its reasonable and good faith judgment. Any such determination (described in the preceding sentence) by the Company must be reasonable, must be made in good faith, and must be made without any intent to postpone or limit such exercise, grant or distribution beyond the minimum extent necessary and without any intent otherwise to deny or frustrate the Grantee's rights in respect of the Option. In seeking to effect or obtain any such withholding, listing, registration, qualification, consent or approval, the Company shall act with all reasonable diligence. -6- 7 Any such postponement or limitation affecting the right to exercise the Option shall not extend the time within which the Option may be exercised, unless the Company and the Grantee choose to amend the terms of this Award Agreement to provide for such an extension; and neither the Company nor its directors or officers shall have any obligation or liability to the Grantee with respect to any Shares with respect to which the Option shall lapse, because of a postponement or limitation that conforms to the provisions of this Paragraph 17. (18) No fractional Shares shall be issued pursuant to this Award Agreement. The Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of fractional Shares, or whether fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (19) Nothing in this Award Agreement shall confer upon the Grantee the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) the Grantee at any time for any reason. The grant of the Option shall not give the Grantee any right to similar grants in future years. (20) So long as this Award Agreement shall remain in effect, the Company shall furnish to the Grantee, as and when available, a copy of any Prospectus issued with respect to the Shares covered hereby, and also a copy of all material hereinafter distributed by the Company to its stockholders generally. (21) This Award Agreement and the provisions thereof shall be binding upon, and inure to the benefit of, any successor or successors of the Company and the person or entity to whom the Option may have been transferred by will, the laws of descent and distribution, or beneficiary designation hereunder. -7- 8 (22) The Award Agreement shall be governed and its provisions construed, enforced and administered in accordance with the laws of the Commonwealth of Massachusetts except to the extent that such laws may be superseded by any Federal law. It may not be modified orally. WYMAN-GORDON COMPANY By: /S/DAVID P. GRUBER David P. Gruber President and Chief Executive Officer The foregoing Award Agreement is hereby accepted and the terms thereof hereby agreed to GRANTEE Grantee's Signature Grantee's Address: Social Security Number: -8- ?? EX-27 5 FINANCIAL DATA SCHEDULE
5 3-MOS MAY-31-1997 MAY-31-1996 AUG-31-1996 27,904 7 87,160 0 72,820 221,605 410,366 268,438 390,562 96,082 90,231 0 0 37,053 82,316 390,562 133,583 134,235 122,744 122,744 0 0 2,607 (11,865) (19,680) 7,815 0 0 0 7,815 0.21 0.21
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